Abbey and Halifax in savings war

A SAVINGS war has broken out between the Halifax and Abbey. The High Street banking rivals are going head to head in the fight claim the No.1 slot on the monthly savings best-buy tables, with Abbey claiming its account is far better.

Earlier this week, Halifax announced it was raising the interest rate on its Regular Saver account from 6% to 7%. The news was covered by a media embargo until today.

But yesterday, Abbey, which pushed Halifax from the top slot when it introduced its own monthly savings account paying 6.5%, moved to take the shine off the Halifax announcement. It said it, too would be increasing its rate to 7%.

At the same time, it was at pains to point out that its product was superior to Halifax's because customers could save twice as much and withdrawal penalties were much less severe.

Abbey launched its monthly saver just a few weeks ago. Those who signed up at 6.5% will now earn 7% (5.6% after basic-rate tax).

To qualify for the 7% rate, Halifax customers must save at least £25 but not more than £250 a month for 12 months in a row. Lump-sum investments are not permitted. If any withdrawals are made or the account is closed early, the rate of interest will be cut to 4.9%.

At maturity, the capital and interest is swept into one of four Halifax instant access savings accounts opened at the outset by the customer.

Abbey Fixed Rate Monthly Saver customers can put in between £20 and £500 per month. If savers invest the maximum of £6,000 over the 12 months they will earn £215 interest.

Abbey says that Halifax savers who invest the maximum £3,000 will earn £106. Halifax says it will pay £114.

Abbey customers who make withdrawals will lose one month's interest. After 12 months, the account pays 5% (4% after tax) as long as you save at least £20 a month and don't touch it. If you dip into your savings, the rate drops to 1.25% (1%) for one month.